Event: The company publishes its 2024 mid-year report. The company achieved revenue of 8.908 billion yuan in 2024H1, +0.34% year on year, and realized net profit of 0.896 billion yuan, or -2.97% year on year; single Q2 achieved revenue of 4.558 billion yuan, -7.44% year on year, and realized net profit of 0.476 billion yuan, or -9.07% year on year.
The sofa and custom categories are growing steadily, and the export sales performance is good. By category, 2024H1 sofa/bedroom products/ integrated products/ custom furniture/ information technology services were +14.24%/-19.92%/-17.42%/+24.85%/-22.51% to 49.42/15.34/1.268/0.491/0.325 billion yuan respectively. Among them, sofas and custom furniture achieved steady growth, and the company's custom furniture took the lead in attacking the market with 698 yuan packages in the industry to meet the diverse needs of consumers. Against the backdrop of weakening housing completion data, overall revenue for 2024Q2 was -7.44% year-on-year, and overall revenue increased slightly in the first half of the year. Looking at the subregion, 2024H1 achieved revenue of 4.722 billion yuan/3.887 billion yuan respectively, or -9.79%/+12.59%, respectively. The company stabilized the basic market of major customers in the North American market, vigorously developed the supermarket business, seized a large number of orders in superior categories, and further increased the share of SPO business, and export sales are expected to continue to grow steadily.
Strengthen the foreign trade supply chain system and continue to improve gross margin. The company's 2024H1 gross profit margin was 33.03% (+1.52pct year over year), with domestic sales and export gross margins of +1.27pct and +2.87pct, respectively. The gross margin for a single Q2 was 32.98% (+1.97pct year over year). The company leveraged the advantages of supply chain collaboration, optimized the customer structure and product structure, increased the overseas localized procurement rate, and the gross margin continued to improve. On the cost side, the cost rate during 2024H1 was 21.3% (+2.07pct year over year). Among them, sales, management, and R&D rates were +0.92/+0.21/+0.65pct to 17.02%/2.39%/2.03%, respectively. The increase in sales rates was mainly due to an increase in employee remuneration. Taken together, the 2024H1 net margin was 10.32%, -0.08pct year over year.
Domestic and foreign sales are two-wheel drive, and the increase in executive holdings shows confidence. Currently, real estate sales still need to be improved. The company continues to practice internal skills, firmly transforming domestic trade from offline to “whole” operations, domestic trade online to channel-driven transformation, and foreign trade to “multinationalized/localized value chain integration”. The operation is expected to continue to improve. At the end of July 2024, the company announced that Mr. Li Donglai, a director and senior manager, plans to increase his A-share holdings through centralized bidding transactions in the secondary market. The amount of increase in holdings is 0.15 billion yuan to 0.22 billion yuan, demonstrating confidence in long-term development.
Investment advice: Considering that current domestic sales demand still needs to be fixed, we adjusted our profit forecast. We expect the company's net profit to be 2.2/2.57/2.99 billion yuan in 2024-2026, respectively, and the corresponding PE will be 9/8/7 times, respectively, maintaining the “increase” rating.
Risk warning: Real estate sales decline, raw material prices rise, category expansion falls short of expectations